Noodles & Company, Inc.
Noodles & Company, Inc.
Sales: $28.4 million (2001)
NAIC: 722211 Limited Service Restaurants
Noodles & Company, Inc. is a chain of global noodle shops offering a variety of noodle and pasta dishes influenced by Asian, European, and American flavors and prepared fresh-to-order in a hot sauté process. The company operates more than 56 restaurants in Colorado, Wisconsin, Minnesota, Illinois, Maryland, and Virginia. Noodles & Company provides a low cost meal in a fast-casual environment. Noodle dishes are priced under $6.00, with chicken breast, beef tenderloin, seared shrimp, or tofu available for less than $2.00 extra. Customers purchase their meals at the service counter and employees deliver food to the table in china bowls with silverware. Noodles & Company offers ten noodle dishes, six salads, and two soup flavors. Noodle dishes include Indonesian Peanut Sauté with rice noodles, Wok-Seared Lo Mein, and Roma Tomato Marinara with penne pasta. Japanese Pan Noodles is the most popular dish: udon noodles with broccoli, carrots, and shitake mushrooms sautéed in a pan heated to 450 degrees; the dish is flavored with ginger, garlic, and the company’s sweet soy sauce and finished with fresh scallions and mung bean sprouts. Serving more than 25,000 bowls of hot noodles daily, the company’s commitment to excellence is embodied in the motto, “Every guest, every bowl, every time.”
Entrepreneurial Inspiration in 1993
As Aaron Kennedy walked down Hudson Street near his home in New York’s Greenwich Village, the pleasure of dining at a Thai noodle shop inspired the notion of opening a restaurant that offered noodle dishes from all over Asia. The entrepreneurial spirit struck like a lightning bolt as Kennedy expanded the idea, conceptualizing an international noodle shop which offered noodle and pasta dishes from around the world. Contemplating the idea further, Kennedy recognized that noodles are a familiar comfort food and common to most cultures; a global noodle shop would be original and have universal appeal.
Ten years experience as a brand manager for Pepsi Cola and Oscar Mayer Lunchables supported Kennedy’s entrepreneurial inclinations. While employed at renowned design firms, he directed marketing programs for Coca Cola, Burger King, Swiss Army Products, The Limited clothing stores, and other major corporations. Though Kennedy did not have experience in the restaurant business, he possessed a unique concept and a willingness to learn.
After relocation to the Denver area, taking a position at a marketing design firm, Kennedy pursued his business idea. Kennedy, then 33 years old, searched through dozens of cookbooks, selecting several sample recipes from cuisines around the world. In 1994, Kennedy met chef Ross Kamens, formerly of the Aspen Lodge Resort, and hired him to consult on recipe and menu development. Kennedy, Kamens, and COO Joe Serafín met to cook and test recipes. In 1995, Kennedy founded The Noodle Shop Company, raising $250,000 in capital through 25 private investors, including family and friends, and a second mortgage on his home.
The first Noodles & Company restaurant opened in the Cherry Creek neighborhood southeast of downtown Denver in October 1995.
Kennedy chose the upscale shopping district because the location attracted educated, active, health-conscious consumers with disposable income. The menu consisted of nine noodle dishes, four salads, and two soup flavors. Noodles & Company offered a bowl of noodles for under $5.00 and a chicken or beef option for an additional $1.00. The 2,500-square-foot space provided seating for 50 customers in a plain setting. Food was prepared in advance and kept warm. Beverages included beer, wine, premium sodas, and specialty teas.
Noodles & Company generated $100,000 in revenues in 1995. Lunch comprised 45 percent of sales while dinner accounted for 55 percent of sales. With child-friendly food in the form of Wisconsin Macaroni and Cheese, the restaurant attracted families in the evening and experienced stronger business for dinner than many quick-casual restaurants. Take-out accounted for 32 percent of total sales.
Mid-1990s: Entrepreneurial Vision Matures
Though the Cherry Creek restaurant needed some improvement, Kennedy opened a second store in an entirely different market, near the University of Wisconsin in Madison where Kennedy received his MBA in Marketing Management. Kennedy’s friend Tom Weigard, a real estate developer and owner of a Madison wine bar, joined the company at this time. With funds from additional private investment, Kennedy and Weigard opened the Madison store in March 1996.
The course of the company’s development took a dramatic turn after a negative review of the restaurant appeared in the Wisconsin State Journal that April. The review deterred patronage of the shop and two months later sales covered only labor and food costs. Kennedy, Kamens, Weigard, and a team of consultants traveled to Madison to evaluate and reshape the concept. The “Redefine Noodles & Company” meeting began in Chicago where the group visited a handful of noodle shops, sampling various dishes and observing the food preparation process, hot sauté to order. Upon arrival at the Madison store, they found the atmosphere sterile and the pricing too low. Worse, the food proved substandard, just as the restaurant review stated.
While the team argued points of refinement, a rainstorm flooded the basement of the restaurant; they bailed water all night. From this prospect of disaster arose a new determination to make the business a success. Kennedy listed fifteen problems and the steps the company would take to resolve them. Kennedy hired two new managers, one with experience in fast food procedures and one with experience in fine dining. Kamens revamped the menu and reformulated recipes. He sought new food sources, such as a 50-year Japanese artisan master who made shanghai and udon noodles. Kamens determined a method of serving noodles that were not overcooked: prepared al dente, the noodles were shocked with cold water, stored at 38 degrees, and then cooked further during the hot sauté process. An architect on the team restructured the restaurant to allow for the hot sauté food preparation. With all problems resolved, the restaurant became profitable by fall and Noodles & Company opened a second store in Madison in May 1997.
Noodles & Company refined its brand concept further by hiring interior designers, graphic designers, and advertising professionals. For a savvy, urban look, new stores would blend an ochre and sage interior with warm lighting and wood tables, exposed ductwork, and a hand-troweled concrete service counter. The cost of opening a store ranged from $250,000 to $350,000 depending on seating, with each unit holding between 32 and 90 seats.
The company preferred corner locations with natural light and traffic visibility. Cooperation with other food service companies created “dining destinations” where the restaurants grouped together in a commercial district. Noodles & Company sought locations in downtown areas or in neighborhoods with a dense mix of residential housing and white-collar office buildings. The company defined its target market to account for level of education, population density, family size, and age of population.
With a polished brand concept, Noodles & Company opened new stores, though at a slow pace. The company raised $1 million in 1998 and $3.2 million in 1999, for a total of $5 million in private investment funds since the company’s inception. In 1998, Noodles & Company opened stores in Boulder and Denver; a total of five stores generated $2.4 million in revenues. The company entered the Minneapolis market in September 1999, and the company’s seventh store opened in Monona, in the Madison area, a month later. Noodles & Company recorded gross sales of $5.6 million in 1999, averaging approximately $1 million per store. Each store served approximately 500 customers per day, with a check average of $6.75 per person. Same store sales increased 31 percent for units open at least one year and surveys showed a repeat business rate of 30 percent weekly and 55 percent monthly.
Noodles & Company accelerated its rate of growth in 2000, opening ten stores. These included a unit in Fort Collins, Colorado, two units in the Denver metropolitan area, six in Minneapolis-St. Paul, and one each in Madison and Milwaukee. The company closed the year with 17 restaurants in operation and $13.5 million in revenues.
Early 2000s: Evolution and Expansion
Kennedy’s experience with the first Madison store taught him to take a more analytical approach to business, so Noodles & Company instituted a continual review process. In 2000, the company formed the Culinary Steering Committee. The five members conducted customer surveys and in-store interviews and addressed customer suggestions. They determined what dishes needed refinement and acted as taste-testers. Kimberly Helouin, food scientist and sensory analyst, joined the company to manage food production at the central kitchen. In early 2001, Kamens returned as executive chef after a three-year hiatus. The company also hired a research and development chef and a quality assurance and support manager.
Everyone loves noodles. And this is exactly the kind of restaurant those noodle lovers had in mind. What do six billion people have in common? They all love noodles.
Thai noodles. Stir fry. Macaroni and cheese. Udon and penne. Imagine if you could get all those irresistible noodles in one place. That’s what Aaron Kennedy did when he founded Noodles in 1995. If you love noodles, it’s exactly what you had in mind.
Refinements to the menu involved experimenting with changes to existing recipes and developing new recipes. The addition of sherry and fresh herbs improved the taste of Mushroom Stroganoff, resulting in increased sales of that item. Pesto Linguini became Pesto Cavatappi, cavatappi being a hollow, spiral noodle that holds the pesto sauce more effectively than linguini. To add variety to the menu, Noodles & Company created seasonal dishes. In winter 2001, the company introduced Buffalo Chili: ground buffalo meat, black beans, and kidney beans in a zesty tomato sauce, served over egg noodles. Roasted Tomato Cream, offered in spring 2002, combined fresh and roasted tomatoes in cream sauce, served over fettuccini noodles.
The appeal of the global noodle shop, serving light, freshly prepared comfort food, attracted attention from a variety of business interests. Continuum Partners, developer of 16 Market Square in downtown Denver, approached Kennedy to open a restaurant in the exquisite, new Northern Trust Bank building; Noodles & Company opened there in February 2001. Nation’s Restaurant News recognized Noodles & Company with its “Hot Concepts” Award in May 2001. The success of the global noodle shop concept attracted investors and the company raised $3 million in a June 2001 private stock offering.
Noodles & Company met its goal of opening 20 new stores in 2001, for total of 37 noodle shops in operation. Besides adding new restaurants in existing markets, the company entered the Chicago market with stores openings in Wheaton, Naperville, and Deer Park Town Center. The company recorded sales of $28.4 million for 2001.
With plans to accelerate the rate of expansion, Noodles & Company hired executives with experience in large-scale business operations. Mary Beth Lewis, former CFO at Wild Oats, joined Noodles & Company in October 2001. In January, the company hired Key Keymer, former president of Sonic Corporation, to be president and co-CEO with Kennedy. A veteran of the fast food industry, Keymer’s brought 22 years of executive experience with Taco Bell, Popeye’s Friend Chicken, Boston Chicken, and Perkins Family Restaurants. In 2002, Noodles & Company opened 25 new restaurants, entering new markets in the Washington, D.C., area, with one store each in Arlington and Fairfax, Virginia, and one store in College Park, Maryland.
A greater concentration of Noodles & Company stores in the Denver-Boulder region, in metropolitan Chicago, and in Minne-apolis-St. Paul made television advertising a viable means of promotion by the end of 2002. The company launched its first television advertising campaign in November, spending $13 million. The two commercials employed the tagline, “We’re going to get you.” In “UFO,” noodles danced down the ladder of a space ship that looked like the company’s signature china bowl upside down. In “Snake Charmer,” the quintessential snake charmer plays the flute, causing a noodle to rise from a Noodles & Company bowl. The noodle ensnares the snake charmer and lifts him into the air. The advertising campaign was intended to build brand recognition rather than to sell specific foods. Targeting 25- to 49-year olds, the commercials aired during prime time and late at night on ESPN, TLC, Nickelodeon, Animal Planet, Lifetime, NBC, and WB.
Kennedy decided to slow the company’s rate of growth for 2003 due to a weak economy, expecting to open 30 restaurants. New markets under consideration for expansion included Dallas, Salt Lake City, and the Detroit-Ann Arbor area. A successful private placement of common stock in September 2002 raised $10 million for equipment and facilities purchase and leasing, as well as for working capital. In 2003, The Noodle Shop Company officially changed its name to Noodles & Company.
Brinker International, Inc.
- The first Noodles & Company restaurant opens in Denver.
- A negative review of the Madison, Wisconsin, store prompts the company to refine its concept.
- With five restaurants in operation, revenues reach $2.4 million.
- The company accelerates growth with ten new store openings.
- Nation’s Restaurant News names Noodles & Company a “Hot Concept.”
- A private offering of stock raises $10 million for facilities, working capital, and expansion.
Berta, Dina, “Noodles & Co.,” Nation’s Restaurant News, May 2001, p. 62.
Cebrzynski, Gregg, “Noodles & Company Takes to Airwaves, Rolls 1st TV Spots,” Nation’s Restaurant News, November 4, 2002, p. 14.
Conklin, Michele, “Restaurateur Uses His Noodle for Cherry Creek North Eatery,” Rocky Mountain News, October 5, 1995, p. 65A.
“Former Sonic President to Take Helm at Noodles & Company,” Business Wire, January 17, 2002.
Franklin, Jennifer, “Noodle Chain Plans Seven Metro Stores,” City Business (Minneapolis-St. Paul), September 1999.
LaVecchia, Gina, “Going Bowling,” Restaurant Hospitality, July 2000, p. 62.
Myers, Deborah J., “Noodles Keeps Its Big Bowl Restaurant Chain Moving into Bigger Local Headquarters,” Boulder Daily Camera, April 5, 2002, p. E1.
Ochoa, Julio, “Noodles & Company Uses Financing to Expand into Louisville Location,” Boulder Daily Camera, August 16, 2000, p. 1B.
O’Sullivan, Kate, “Trust but Verify,” Inc., April 2001.
—, “Using Your Noodle,” Inc., September 2001, p. 157.
Parker, Penny, “Entrepreneur Uses His Noodle,” Denver Post, February 16, 1999, p. C1.
Quigley, Kelly, “Noodle Restaurant Chain Plans to Load up in Milwaukee,” Business Journal-Milwaukee, November 5, 1999, p. 6.
Rebchook, John, “Noodles & Company Expands in Boulder,” Rocky Mountain News, April 5, 2002, p. 5B.
Rogers, Monica, “The Zen of Noodles: Noodles & Company Menu Master Ross Kamens Never Stops Exploring New Ways to Prepare Pasta,” Chain Leader, January 2002, p. 24.
Ruggless, Ron, “Noodles & Co. Plots Growth, Sparks Rocky Mountain Buzz,” Nation’s Restaurant News, December 6, 1999.
Sharos, David, “Eatery Owner Adds Naperville to Plate,” Chicago Tribune, March 15, 2001.
Sneider, Julie, “Just Noodles,” Business Journal-Milwaukee, December 7, 2001, p. S4.